Why HR's Organizational Structure Matters

Small business owners wear many hats. One of those is often handling your business's HR responsibilities. An OnPay study found that more than 40% of small business owners admitted to handling HR themselves. While this may be feasible for some small businesses, it will likely become too much of a burden as you grow. Workforce planning, job evaluation, recruiting, compensation, benefits administration, employee engagement, performance management, safety and compliance are just a few of the many essential areas of focus for HR.

Since HR is responsible for so many functions in your organization, you may need one or more employees to manage it. There are many ways to structure the hierarchy of those workers. Learn why finding the right HR organizational structure matters for your business.

What is an organizational structure?

An organizational structure is the framework of a company or department. It lays out and defines priorities through positions with generalist and/or specialist roles, indicating who reports to whom and how each person fits into the big picture. It also establishes decision-making as centralized or decentralized.

An effective organizational structure can lay a foundation for positive impacts on the business. It flows with the company culture and is designed to attract and retain high-performing people through the creation of positions that leverage their highest skills and provide development and growth. This ensures meaningful work and a sense of purpose that carries into the future.

What is HR's role in organizational structure?

Your HR team is responsible for helping maintain an effective organizational structure by hiring the right employees for each open position, nurturing an environment of growth, and guiding employees through their life cycles with your business. To best help your company perpetuate its organizational structure, your HR team must have an organizational structure of its own.

HR's organizational structure matters because it provides the framework to align resources with the priorities defined in your business strategy and to embody the organization's culture. The structure directly impacts the company's ability to attract, engage and retain top HR talent. Subsequently, the work that HR staff does will impact business success in the future. Its effects go beyond HR function itself.

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Here are some common business functions your HR staff can fulfill by maintaining an organizational structure:

• Developing multiple generations of workers and providing them with the tools they need to be effective. [Read related article: How to Manage Millennials vs. Gen Z in the Workplace]
  
• Engaging technical experts with high potential and developing them into senior leaders who contribute to the business's value proposition and competitive advantage.
• Developing line managers to become more proactive in managing and coaching talent.
• Improving communication skills in leaders, motivating employees, and respecting cultural differences.
• Designing business organizational structures and managing change as business needs become increasingly complex.
• Integrating career planning with workforce planning and employee engagement so employees can identify career paths and job opportunities within the organization.
• Leveraging decision support tools, analytics, metrics and models to make big data more useful in managing the workforce.
• Applying mobile and other new technologies to provide training and development on demand.

Tip: HR professionals are an important part of any organization. If you don't have an HR team yet, check out these key signs that it's time to consider hiring your first HR professional.

Types of HR organizational structures

Several organizational structures are typical in today's HR departments; some are simple, others are complex. How can leaders determine which structure will have the most positive impact on the business? How can HR employees and job candidates determine which structure will best enable them to achieve their career goals? The best type of HR organizational structure for your business will depend on your specific needs.

At a basic level, you must decide what type of HR staff you need. For example, one business may only need to hire one HR professional, whereas another business may need to expand to an entire HR department. Either way, your HR organizational structure should account for each HR member you hire. Let's look at differences between some typical organizational charts.

Some popular HR organization structures have the following structural characteristics:

• Shared services supported by technology
• Centers of expertise/excellence and embedded business partners
• Generalists under the leadership of HR managers, directors and VPs
• Corporate HR functions who push initiatives down and across through each division's HR team
• Matrix environments
• Centralized decision-making
• Decentralized decision-making

FYI: The most common type of organizational structure is centralized.

Positions to consider in your HR department

Not all HR personnel will have the same strengths and weaknesses. If you have a midsize or large company, you'll need to fill at least a few different roles to support your employees adequately.

Here are a few of the positions you should consider hiring for within your HR department:

• HR manager: Every strong department needs a manager, and HR is no different. They will organize the department to field complaints and institute office policies that support a healthy work environment. Unless you're a small company with only one HR representative, you'll need someone in charge to keep things running smoothly.
  
  
• Recruiter: A recruiter is vital to finding new talent. It's helpful if your recruiters have an HR background. The ability to understand the office culture and how different personalities interact is an excellent quality for someone in charge of hiring to have. Recruiters should take direction from the HR department to find candidates who are not only qualified but will succeed in the workplace.
  
  
• HR admin assistant: Depending on the size of your company, it may be a good idea to hire an administrative assistant specifically for HR. They will be able to organize complaints and keep a detailed record of events that transpire in the office. That will be helpful if there is ever a dispute or a need to analyze daily office activity.
  
  
• Training manager: A training manager is vital for getting the most out of new employees. You can always rely on more seasoned employees to provide training, but that distracts them from their own responsibilities. A dedicated hiring manager will give you a greater ability to integrate new talent into the workplace without disruption.

Regardless of how many HR professionals you have on your team, there is a good chance you will also need some form of HR software to help automate your HR processes and keep all your HR documents in one streamlined platform. There are several highly rated HR software solutions available, depending on what features you need. For example, Paychex is a great option for remote teams, whereas Rippling is ideal for those who want an easy implementation process. Learn more in our full review of Paychex and our Rippling review.